BAM 2204- STRATEGIC MANAGEMENT

Overview-The greatest challenge for a successful organization is change. This

threatening change may either be internal or external to the enterprise.

The concept of strategy

The concept of strategy in business has been borrowed from military science and
sports where it implies out- maneuvering the opponent.
The term strategy began to be used in business with increase in competition and
complexity of business operations.
A strategy is an administrative course of action designed to achieve success in the
face of difficulties. It is a plan for meeting challenges posed by the activities of
competitors and environmental forces.
Strategy is the complex plan for bringing the organization from a given state to a
desired position in a future period of time.
For example, if management anticipates price-cut by competitors, it may decide
upon a strategy of launching an advertising campaign to educate the customers and
to convince them of the superiority of its products.
Nature of strategy;
 Strategy is a contingent plan as it is designed to meet the demands of a difficult
situation.
 Strategy provides direction in which human and physical resources will be
deployed for achieving organizational goals in the face of environmental pressure
and constraints.
 Strategy relates an organization to its external environment. Strategic decisions
are primarily concerned with expected trends in the market, changes in government
policy, technological developments etc.
Strategy is an interpretative plan formulated to give meaning to other plans in the
light of specific situations.
 Strategy determines the direction in which the organization is going in relation to
its environment. It is the process of defining intentions and allocating or matching
resources to opportunities and needs, thus achieving a strategic fit between them.
Business strategy is concerned with achieving competitive advantage.
 The effective development and implementation of strategy depends on the
strategic capability of the organization, which will include the ability not only to
formulate strategic goals but also to develop and implement strategic plans through
the process of strategic management.
 A strategy gives direction to diverse activities, even though the conditions under
which the activities are carried out are rapidly changing.
 The strategy describes the way that the organization will pursue its goals, given
the changing environment and the resource capabilities of the organization.
 It provides an understanding of how the organization plans to compete.
 It is the determination and evaluation of alternatives available to an organization
in achieving its objectives and mission and the selection of appropriate alternatives
to be pursued.
 It is the fundamental pattern of present and planned objectives, resource
deployments, and interactions of a firm with markets, competitors and other
environmental factors.

A good strategy should specify;

 What is to be accomplished
 Where, i.e., which product/markets it will focus on
 How i.e., which resources and activities will be allocated to each product/market
to meet environmental opportunities and threats and to gain a competitive
advantage
(SWOT Analysis)

Components of strategy
1. Scope; refers to the breadth of a firm’s strategic domain i.e., the number and
types of industries, product lines, and markets it competes in or plans to enter.
2. Goals and objectives; these specify desires such as volume growth, profit
contribution or return on investment over a specified period.
3. Resource deployment; strategy should specify how resources are to be obtained
and allocated across businesses, product/markets, financial departments, and
activities.
4. Identification of a sustainable competitive advantage; it refers to examining the
market opportunities in each business and product-market and the firm’s
distinctive competencies or strengths relative to competitors.
5. Synergy; this exists when the firm’s businesses, products, markets, resource
deployments and competencies complement one another i.e., the whole becomes
greater than the sum of its parts (2+2=5) Strategies can be classified into corporate,
business-unit and functional strategies.
Concept Management?
a) Planning
b) Leading/Staffing/Directing
c) Coordinating/Organizing
d) Evaluation & Controlling

Definition; Strategic management is the process by which top management

determines the long-term direction of the organization by ensuring that careful
formulation, implementation and continuous evaluation of strategy take place. The
strategic management process

The process can be broken down into three phases;

 Phase 1- Strategy Planning & formulation (Two steps in one)
 Phase 2- Strategy implementation
 Phase 3- Strategy Evaluation & control

1a. Components of Strategic Planning (strategic Intent)

-Goals/Objectives
-Vision: Where are we? Where do we want to be (future desired position/dream)?
How do we get there (Means/Strategy/ways)?
-Mission_ Aim/What are doing/involved? (The reason for our existence)
-Core Values- What we stand for-
-Core competence
-Plans
-Strategic fit

1b. Strategy formulation involves;

 Defining the organization’s guiding philosophy & purpose or mission.
 Establishing long-term objectives in order to achieve the mission.
 Selecting the strategy to achieve the objectives

2. Strategy implementation involves;

 Establishing short-range objectives, budgets and functional strategies to achieve
the strategy.
Considerations of Strategy Implementation
-Goals/objectives
-Resources (Human, Capital, Technology, Expertise, Equipment,
Ideas/knowledge/information)

Strategy evaluation and control involves the following;

 Establishing standards of performance.
 Monitoring progress in executing the strategy.
 Initiating corrective actions to ensure commitment to the implementation of the
strategy.

Defining an organization’s purpose/mission

 The mission defines the fundamental reason for the organization’s existence. It
provides a framework for decision-making that gives direction for the entire
organization.
 It is an overall goal of the organization that provides a sense of direction and a
guide to decision-making for all levels of management i.e. organizational
objectives and strategies at lower levels are developed from the mission.
 The mission describes the organization’s line of business, its products and
specifies the markets it serves within a time frame of 3 to 5 years.
 The mission defines the boundaries or domain within which the organization will
operate. The boundaries may be defined as industries or types of industries.
 The mission should not prevent change but provides direction for seeking new
opportunities.
 It should be broad enough to allow exploitation of new opportunities but specific
enough to provide direction.
 A mission should be achievable, in writing and should have a time frame for
achievement. Mission statements should include the following components;
 Targets customers and markets
 Principal products
 Geographic domain
 Core technologies used
 Concern for survival, growth and profitability
 Organizational self-concept
 Desired public image
 The organization’s guiding philosophy
The organization’s philosophy establishes the values and beliefs of the
organization about how the business should be done and the organization’s role in
the society. It establishes the relationship between the organization and its
stakeholders i.e. its responsibilities towards customers, employees, shareholders
and general public. Establishing organizational objectives
An objective is a statement of what is to be achievable, measurable and stated with
specific time frames. They can be classified as either short-range, medium or long
range. They may also be corporate, business unit or functional/ departmental
objectives. Organizational objectives may be in the following areas;
1. Profitability and profit growth
2. Service to customers
3. Employee wellbeing and welfare
4. Social responsibility (Business community/surrounding)

Strategic business units (SBUs) (Cost and Revenue)

A large organization’s activities can be segmented as business units. A business
unit is an operating unit in an organization that sells a distinct set of products to a
distinct market in competition with a well-defined set of competitors. It is normally
referred to as an SBU. An organizational SBU often has the following
characteristics;
 It has its own set of customers.
 It should have a clear set of competitors, which it is trying to surpass.
 It should have its own strategic planning manager responsible for its success.
 Its performance must be measurable in terms of profit and loss, i.e. it must be a
true profit centre. e.g. K.B.C.’s SBUs include; K.B.C Kiswahili, K.B.C. English,
Metro FM, K.B.C. T.V, Metro TV etc. Benefits of strategic management
 It provides the organization with consistency of action i.e. helps ensure that all
organizational units are working toward the same objectives (direction).
 The process forces managers to be more proactive and conscious of their
environments i.e. to be future oriented.
 It provides opportunity to involve different levels of management, encourage the
commitment of participating managers and reducing resistance to proposed
change.
Role of Managers in Strategic Management Process
-Assess firm’s SWOT so as to determine the course of action (What strategy to
develop and adopt)
-Assign responsibilities to the staff and allocate resources
-Formulate the strategy
-Evaluate the strategy implementation (identify business gaps and propose
corrective active actions)
-Advice the employees
-Give recommendations based on the internal and external factors to minimize
risks and formulate plans on how to achieve the desired long-term goals
-Monitor and cheer/encourage employees (Facilitate employee relations and
resolve the HR issues affecting employees)
-Training of employees (equip them with skills and knowledge)
Business Environments
Internal Environment (Controllable) External (Uncontrollable)
-Resources i. Competition/customers
i. HR ii. Government policy
ii. Capital iii. Political factors
iii. Technology iv. Economic factors
iv. M&E v. Socio-cultural factors
v. Land vi. Technological
vi. Ideas & Expertise vii. Legal
vii. Organizational Culture viii. Environmental/Ecological